BExchange-traded funds related to the information technology sector are on a four-day streak and gaining momentum, breaking above their short-term trend lines.
Friday, SPDR S&P Biotech ETF (NYSEArca: XBI) increased by 2.9% while iShares Nasdaq Biotechnology ETF (IBB), the largest biotech ETF by asset, gained 1.8%. The two biotech-related ETFs also breached their short-term resistance at the 50-day simple moving average.
“If (I repeat, IF) he can rally more, that should help the group see the kind of breakthrough it hasn’t seen in over seven months,” said Matt Maley, chief strategist at Miller Tabak, to Bloomberg, recommending investors watch biotechnology. sector in the second quarter, even despite the warning that a number of clinical trial pauses could add to the regulatory concerns weighing on the sector.
As the broader biotech segment breaks above its 50-day moving average, Raymond James analyst Dane Leone pointed to three technical gauges that could further bolster the rebound in biotech stocks ahead. Specifically, the extreme outperformance of large-caps versus small-cap biotech stocks, the crowding of the sector, and valuations that have dipped below the long-term median are all indicators that the market may be poised to rally. , according to Leone.
The rebound follows “the most extreme period of stress in modern biotech history,” with only the global financial crisis even comparable, Leone told Bloomberg. “The risk-reward for the sector is heavily biased to the upside.”
Other analysts are also advising investors to buy the dip, especially those who have taken the brunt of the sell-off. JPMorgan Chase & Co.’s top strategist, Marko Kolanovic, argued for the recovery of risky assets in battered sectors like biotechnology.
“The current stock price does not reflect the true value of many outstanding companies that are driving a paradigm shift in the industry,” Julia Angeles, who co-manages $71 billion at Baillie Gifford, told Bloomberg. “We are moving to a world where drugs in the future will be more specific, biology becomes engineer-capable, and personalized medicine becomes a reality.
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